An undated confirmation letter cannot be rejected unless proved false – ITAT

An undated confirmation letter cannot be rejected unless proved false. ITAT deletes addition made u/s 68/69 for cash deposits in bank account

ABCAUS Case Law Citation:
ABCAUS 2386 (2018) 06 ITAT

The instant appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) for making addition u/s 68 / 69 of the Income Tax Act, 1961 (the Act) on the issue of cash deposits in Bank account.

During the relevant assessment year, the assessee was a non resident During the course of assessment, the AO noticed that there were cash deposits in bank account of the assessee.

The assessee was asked to explain the sources for the deposits by the AO and in response to the same, assessee explained that the sources were travel cheques and gift from father.

However, in the absence of evidence with regard to travel cheques and sources from father and the lack of nexus between the said sources and the cash deposits in the bank account, the AO added the amount of cash deposited in bank account as unexplained credits u/s 68 of the Act.

Aggrieved by the addition, the assessee preferred an appeal before CIT(A). The assessee filed affidavit, details of deposits in NRO Account, details of withdrawals made from NRE Account and ITR, computation of income, confirmation letter from the father.

The AO objected to the admission of letter filed by the assessee during the appeal proceedings on the ground that it constituted additional evidence. AO also mentioned that the father of assessee, also did not file copy of the bank account from which this amount was given. In his remand report, the AO concluded that there was no direct nexus between the so called withdrawal of cash by the father and deposit by the assessee as there is a long gap of 7 months between the withdrawal of cash and deposit of cash in these bank accounts.

With respect to the remand report the assessee filed a letter giving additional evidence as per Rule 46A of the Act. In this submission, assessee filed confirmation letter dt. NIL from his father with regard to the gift given to him and filed a copy of bank account.

However, the CIT(A) did not accept the submissions of assessee and confirmed the addition observing that the letter submitted by the appellant’s father was without any date. Also, the CIT-A rejected the additional evidences and held that even if provisions of Section 68 were not applicable, they were to be added under section 69 of the Act.

The Tribunal questioned the way CIT(A) rejected the evidence furnished by assessee under rule 46A of the Act. The CIT-A, while gave a finding that records furnished were not additional evidence, at the same time, he rejected the same in terms of Rule 46A. The stand of CIT(A) was not only contrary but also devoid of merits.

The Tribunal observed that the assessee’s contention was that he had brought traveler cheques encashed them and deposited the money in the bank accounts. After lapse of time, the details of traveler cheques are generally not available with assessee.

The Tribunal opined that just because the confirmation from the father was not dated, the same cannot be rejected, unless the same was proved to be false. Inspite of remanding the matter to AO, no enquiries had been conducted by the AO and without rejecting the evidence filed by assessee, they were simply disbelieved and CIT(A), after sending the evidence on remand, rejected them at a later stage which was also not according to the rules. Having admitted the evidence and sending it on remand to AO under Rule 46A, he cannot go back and refuse the same at a later stage.

The Tribunal was surprised to note that while CIT(A) accepted that the provisions of Section 68 could not be invoked, he invoked Section 69 of the Act, which did not apply to the facts of the case as the AO had not made out any case of unexplained investments made by assessee. These were simply deposits in the bank account which were generally considered as ‘cash credits’ and provisions of Section 68 are correctly invoked by AO.

The Tribunal on being satisfied that the amounts were explained opined that the addition was not warranted. The AO was directed to delete the addition.

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